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Thanks RobbyG - I will indeed read Chomsky's book asap.

The frightening thing is how many swallow hook, line and sinker the spin that is used to cover up these facts. Eg - the 'other' hates our liberty, 'it's a clash of civilisations', 'we are spreading liberty' etc etc!

Cheers,
Shafique

Well you should nuance it a bit more in the sense that neither every soul in the CIA nor the American government all agree on US policies that are pursued. Most people are either ignorant about world matters or just don't care. Others, like the CIA senior officials that left the job under the Bush adminstration was a real blow to the CIA. Some top officials didn't want to paint a picture that wasn't based on the obvious intelligence! So its not a problem of integrity and warmongering on all levels, its the hierarchy that is the problem and the nutjob that rules the level in the hierarchy.

The more power some people get, especially under some ideology are extremely dangerous. Elite's only think of more power, more this and more that. Its an addiction that normal people will never really understand. For a leadership in a superpower you do have to focus on getting your resources, just as the Chinese are now all-in on Africa. They also have contracts with Iran. Russia has enough resources of its own, but is using the same leverage on the ME region to try and stop the USA in closing in on its borders. Don't think Communist China is any better that the US or Russia.

The US is now in control of Iraq, which is the second largest in untapped oil resources in the world. It has big leverage in the center of the ME. So when you look at the interests of China and Russia, they are obviously not happy with so much US leverage. It wouldn't surprise me if China and Russian are funding Hezbollah to counter the American insurgency.

Its a dangerous game of great covert forces. You don't want to be a benevolent puppet standing in between them. Thats for sure. Eisenhower once said in the '50s that you have to be aware of the military industrial complex. Intelligence and private corporations in the 'defense' industry are unbelievably powerful in lobbying Congress. Ron Paul is also spot on when it comes to analyzing what is happening in the USA of today. He wants to restore the Constitution so that the US becomes a true democracy once again, with all the liberties it once had. He knows the CIA is way too powerful and that the public, nor its representatives even know what its real agenda is up to.

Fascinating stuff. Anyway, I have managed to get a copy of Failed States and will report back when I've finished it.

As for your analysis in your last post - it is totally in accord with what I've read so far as well. Chomsky argues the same in his other books - IIRC - and the illusion of democracy in the States is a theme that surprised me when I read about it first.

Cheers,
Shafique

shafique wrote:Fascinating stuff. Anyway, I have managed to get a copy of Failed States and will report back when I've finished it.

As for your analysis in your last post - it is totally in accord with what I've read so far as well. Chomsky argues the same in his other books - IIRC - and the illusion of democracy in the States is a theme that surprised me when I read about it first.

Cheers,
Shafique

I have a feeling you will agree with the analysis of the former post also, after reading Chapter 1 of Failed States. You'll be amazed how much sense it all makes.

Edit: You have to see the rants from George Carlin - A Comedian... he's straight to the point so be aware as it contains foul language.

Who Really Controls America: http://www.youtube.com/watch?v=hYIC0eZY ... r_embedded
America Loves War: http://www.youtube.com/watch?v=sDkhzHQO ... r_embedded

Shafique my man, I got something for ya. Something that will set the hairs up from your back.

This video (50min.) is and endgame scenario from prominent strategists about Israel and the ME region. Its a Dutch documentary with written translation below in english. I think you'll find this fascinating, even though its horrific in outcome.

Watch on Youtube:

shafique wrote:Fascinating stuff. Anyway, I have managed to get a copy of Failed States and will report back when I've finished it.

As for your analysis in your last post - it is totally in accord with what I've read so far as well. Chomsky argues the same in his other books - IIRC - and the illusion of democracy in the States is a theme that surprised me when I read about it first.

Cheers,
Shafique

To add to the transparancy controversy of 5 billion dollar 'aid' to Saddam Hussein in 1982, prior to the war with Iran, there recently was evidence introduced by Ron Paul during the inquiry of Ben Bernanke in the House of Rep's that the Federal Reserve (FED) was involved with that money transfer!

View at around 1:50 onwards here:

Bernanke responded:
“These specific allegations you’ve made I think are absolutely bizarre, and I have absolutely no knowledge of anything remotely like what you just described,”

Now Barney Frank (Chairman Financial Committee) wants to probe into this matter of FED involvement in foreign affairs.
http://www.bloomberg.com/apps/news?pid= ... VRck&pos=8

They'll probably destroy the books on this one, but its quite a momentum now that the FED's authority and secrecy is being questioned. That bodes well for future dollar stability and less war efforts backed by FED created money.

Scary stuff.

Unfortunately the man in the street is going to think that this is all 'conspiracy theory' stuff and that's how they'll get away with it.

The more I read into it - the more I'm beginning to agree with the argument that financial system of interest is at the root of the troubles world wide. I mean, I used to think it was wars and desire to get hands on the resources, but it seems it's more and more interdependent with the availability of finance.

I recommend you read the chapter on Finance in a book (actually based on a speech) given in the 1990s - called 'Islam's Response to contemporary Issues' (I may have recommended this before, apologies if I have) - but there he lays out the link between interest based systems and wars.
http://alislam.org/library/books/Islams ... Issues.pdf

Cheers,
Shafique

shafique wrote:Scary stuff.

Unfortunately the man in the street is going to think that this is all 'conspiracy theory' stuff and that's how they'll get away with it.

The more I read into it - the more I'm beginning to agree with the argument that financial system of interest is at the root of the troubles world wide. I mean, I used to think it was wars and desire to get hands on the resources, but it seems it's more and more interdependent with the availability of finance.

I recommend you read the chapter on Finance in a book (actually based on a speech) given in the 1990s - called 'Islam's Response to contemporary Issues' (I may have recommended this before, apologies if I have) - but there he lays out the link between interest based systems and wars.
http://alislam.org/library/books/Islams ... Issues.pdf

Cheers,
Shafique

Yes, I already have that document stored on my PC. I've read it.

I don't agree with the premise of interest being the root of all evil. I do agree that the manipulation of interest rates are the root of all evil! Thats a big difference.

Interest rates are merely the spot price of the supply and demand of money. In a free capitalist economy (forget the USA) interest rates are determined by the need of capital in a part of that economy. If capital is widely available then interest rates are low. If capital is scarce, then interest rates go up to attract that capital. Under the gold standard this was a cyclical phenomenon with a inelastic amount of gold as basis.

After 1971, when the gold standard was abandoned, the amount of fiat money in circulation was completely at the will of setting interest rates per FED decree. Thats the problem of the massive inflation during after the 1960's until now. The gold standard was abandoned because the War in Vietnam was too inflationary and countries that invested in US bonds wanted to be redeemed in gold at $35 an ounce. The absence of monetary and fiscal restraint in the US was worrying the external creditors so that gold seemed suddenly a better store of value, so they demanded the collateral. That meant gold leaving the US, so they had to abandon that standard. In technical terms, the US defaulted in 1971.

Since then, US monetary policy is based on setting interest rates on core inflation rate (absent volatile prices from food and energy prices). This doesn't make sense to someone who thinks logically. The major price effects of inflationary monetary policy are explicitly visible in assets like oil and food! So why exclude that from monetary policy indicators?
Its all an effort to finance wars by eroding the debt by debauching the currency undetected from the publics eye. Also it avoids deflation as per Keynesian school of thought. The side effect of inflationary policies is that politicians are keen to support it, as they don't have to show fiscal restraint as inflation will erode our debt obligations over time. That is, if you don't spend more than you inflate...

The system is flawed in that interest rates should be set by the market. THATS the invisible hand people talk about. At current situation in our world, interest rates are set by Central Banks like the FED and have ruined our financial system on the back of the taxpayers.

Its a long story, but interest rates aren't the problem. Its just who controls the interest rate that matters. To keep capital flowing where it needs to flow to, you need the free market to set interest rates. Not manipulative government policymakers who are so called 'independant' from special interests and politicians/corporations like WallStreet.

I recommend reading into Austrian Economics. It all makes sense, if you really let it work as it is intended to work in a capitalistic system. In our world, the fiat paper system is a US doctrine based on manipulation by the most important monetary body in the world, the FED in collaboration with other central banks in the world.

Niall Ferguson has some interesting views on the Rothschilds and their initial manipulation of bond prices to change the outcome of war in other countries through manipulating the availability of capital. Paper money is just a paper that can be printed without restraint in unlimited amounts. Gold cannot be printed. You have to perform intensive labour to get it out from the ground. Thats effort gives it a value relative to other available assets. The Rothschild family knew this very well and essentially controlled all the finances from governments the world over. If you start from there and study the developments in finance onwards then you will find out exactly how far we've gone to the credit based society of today, and that its doomed to fail.

I agree that if interest rates are allowed to be set by the 'market' you won't get manipulation by governments. However, aren't you then just handing over the reins of this powerful economic tool to those who own capital? (Also, it's a bit 'chicken and egg' with an interest based economy, money naturally accumulates with those with capital - rather than with those who produce actual goods - a point graphically shown in the 'documentaries' 'Money as debt')

But, without getting into the macro-economics too deeply, just think about what the alternative proposal is - a negative interest rate environment. (It is actually a tax on capital that is unused, which can be thought of as a negative interest rate).

What would the implications of a negative interest rate be? First, I'd argue - it would encourage real investments and more responsible lending - the only way to get good returns is to invest in ventures that produce real returns. It will encourage those with capital to invest (for if they don't, it's taxed).

With a negative interest rate, there's also the advantage of low inflationary pressures.

And wouldn't you +also+ get all the benefits of a free market economy you listed abovel? (The owners of capital will just have to share in the risks of the investments - i.e. what venture capitalists and those who invest in stocks and shares do now anyway)

Another benefit is that asset bubbles caused by lending for consumption/speculation will not happen.

There's something crazy about governments borrowing money (and giving interest) and paying it back by money they print. Of course, if there is a 'gold standard' or equivalent, there isn't this problem of manufacturing money out of thin air. But today, the bulk of 'money' is not actually what is printed by governments, but what is conjured out of thin air by banks when they provide credit (as a result of fractional reserve banking) - so perhaps that is also another source of the problems?

So, perhaps another way of looking at the argument - perhaps doing away with interest rates (and fractional reserve banking?) is a potential cure (if you don't believe interest rates is the root of the problem)?

Cheers,
Shafique

Let me clear my view about money and interest rates with an analogy.

Lets visualize a room with a fixed (inelastic) amount of money, like in a gold standard. The room has four corners, each representing a part of the economy. So lets say that in one corner of the room, some entrepreneur discovers an oil field. Suddenly investors start investing in that booming corner, resulting in a rising asset price, called inflation.
At the same time, money has to come from other parts of the room, so in those corners where money moves out there is per definition (some) deflation.

A room based on fractional reserve banking is a room with a money printer in its center, controlled by Ben Bernanke, setting interest rates at which banks can loan money from the FED.
In an economy (room) based on fractional reserve banking, there is the possiblity of leverage. So when an entrepreneur needs a loan for his oil company investments, he borrows $100.000 from his communal bank. The bank asks for a collateral (a deposit, or a claim on his oil company assets) and determines the interest rate based on the risk it sees with the borrower.
When the entrepreneur (the investor) buys goods and services for his oil company, he electronically pays a counterparty the $100.000, thus creating a new deposit at the (same or another) bank. The banks are allowed by the regulatory body (FED) to leverage at a maximum of e.g. 12:1. Therefore, the second bank has to keep $8333 at the FED in order to be able to lend out the difference of $100.000 minus $8333 which is a loan amount of $91.666 for someone else. So each time, money is created, with little collateral at the bank.

So fractional reserve banking goes well when the investment prices keep rising (inflation) but this reverses when price levels continue to decline (deflation). This results in margin calls and bigger loan-loss facilities to keep the banks solvent (assets to liabilities ratio). The company can also go bankrupt when it defaults on its interest paying obligations (e.g. because oil revenues decline) and the investor loses his money.

With deflation, the amount of money in circulation decreases (since credit is destroyed as loans go bad) and less money in circulation chasing the same amount of goods means a stronger currency (if the room has no doors open and money doesn't flow out to other rooms as in other countries). For a creditor, who has savings at the bank, this is great as his purchasing power increases. But for a debtor, who carries a loan amount, inflation will erode his obligations away over time, but the oppossite happens when deflation occurs. After all, his nominal loan amount still has to be paid off.

So once you are locked in debt and inflation decreases (disinflation) or even turns negative, as in deflation, then you have a hard time working your way out of debt. So people and businesses, but also politicians, like inflation as it erodes debt obligations over time.

But your recommendation was to install negative interest rates. So what that means is that the FED is not charging interest to banks to obtain money, but now it pays! the banks money to get their money at the FED. Also, that would mean that you and I are going to get paid interest for loaning money FROM the bank while at the same time the savers who deposit money at the bank for interest, will have to pay the bank! for storing their money at the bank! That doesn't make sense from a capitalist perspective. After all, you want your efforts aimed at improving your personal situation. And when banks can't attract savings capital to lend out, then the economy stops functioning.

So negative interest rates won't work as a solution. The problem is credit creation through fractional reserve banking. Lower gearing ratio's are needed, but if you do it at once, the system would collapse immediately as all banks would be insolvent. As a matter of fact, most banks ARE insolvent, were it not for the FED and ECB to spray money in the economy for practically zero interest rates.

The situation we have today, in the world, is that the private sector is contracting and repaying its huge debtload, while monetary authorities are printing money like madmen to counter that deflationary force of credit contraction. So in a dynamic situation as our global economy, that means huge volatility in markets. Prices go up and down and essentially this means that with near zero interest rates, the markets are incapable of determining value and pricing the assets. After all, with so much money being printed, when that money finds its way from the banking sector into loans on the ground (real economy) then you would have exploding prices, as in hyperinflation.

The only force that keeps that development at bay is the private sector, which is deleveraging by repaying debt loads and behaving rationally. The one body that causes these disturbances is the FED who sets interest rates and hereby supplies the wrong incentives to the market place.

To give an analogy of people as in the amount of money, consider the following:

You own a restaurant in your small town. Each year you get a little more customers in organic population growth, say 3 percent. Suddenly a Circus comes to town without your knowledge, and you get a huge increase of customers so you expand. You build an additional section to your restaurant with a loan from the bank to cope with the increased demand for your services. Suddenly the Circus moves out. Now you overinvested and the market returns to normal. You were given the wrong incentives to expand your business.

Wallstreet got drunk because the FED lowered the cost for obtaining the punchbowl. Same happens in the rest of the economy. Interest rates must be higher to be able for businesses to respond rationally and determining value over the long run.

Negative interest rates are not a solution. Capitalism doesn't work that way.

I can't do your excellent post justice on my blackberry - so will wait write a fuller reply next week.
My view is that you need to go back to even more basic economics - and examine the definition of money.

As a store of wealth and as a means of exchange - money is a tool or proxy for something else.

Taxing unused capital (the negative interest rate) and forcing real investments (where returns come from profit) increase the amount of wealth in the society (the value of goods has increased). With fixed amounts of fiat money (eg gold standard) this means you can buy more with the same gold - the value of the money you hold has increased.

Overall owners of capital are better off because they are getting higher returns (and to a large extent they do this now anyway) - and borrowers pay back loans with capital plus profit share - the risk remains with the lender though (as no interest can be charged)

There's no need to create imaginary money which is what is done with frbanking.

Capital is real and gets used to produce real things, and there's a beneficial spiral.

Cheers
Shafique

Oh bte - almost finished ch 4 - sheeeeeeeeeeeeeeeeeet it's bloody unbelievable!!!!!! I'm fuming (as you can imagine)